“Does this look like the city of Ramallah?” asks Jawad Tamimi, in the doorway of his store on the main street of downtown Ramallah. The scene is very nearly normal: Sidewalks crowded with pedestrians. The aroma of roasting meat wafts from kebab stands. Yellow minibuses line up around a gritty parking garage. What’s different?

“No one carrying bags,” Tamimi points out. “No one buying anything.”

Thus does the United States Congress make its power felt.

If only every tenth Palestinian passerby totes a shopping bag, pita sandwich or other evidence of commerce, a major reason is that $147 million of promised aid is being held back by members of the House of Representatives. Republican committee chairs are punishing the moderate Palestinian Authority for applying for membership in the United Nations last year. The U.N. bid is regarded as overdue by Palestinians but as insolent by Israel, whose support on Capit0l Hill these days is immense..

“If I’d stayed in the U.S. and not come back here, I’d be getting a check at my house every month. I’d have lived like a lord,” says Mohammad Bazzar, age 80. The black and white photo on the American ID he fishes out of his robes shows a much younger man, mustachioed and sloe-eyed. It was decades ago that he left New Jersey to return to Surdi, a village north of Ramallah, where he gets by not on Social Security but by the generosity of friends, at least as long as they have a little extra cash. Bazzar is not optimistic.

“The people,” he announces, “are screwed.”

So it would seem. In a donor economy – which Palestine emphatically is – tides and waves are governed by the whims of distant overlords as much as by global finance. Since 2007, Washington has sent some $4 billion to the West Bank, intent on encouraging the moderate governance of PA President Mahmoud Abbas, whose secular Fatah party the militants of Islamist Hamas had just chucked out of Gaza. While Israel enforced a siege on the coastal strip in hopes of making Hamas less popular, the international community gushed dollars into Ramallah. Thus did the city just north of Jerusalem take on the look of a boom town, its hills stippled with construction cranes and flashy new restaurants, especially on the north end, where aid agencies and “non-governmental organizations” set up shop.

Most of the U.S. money was funneled through NGOs, groups dedicated to “build the capacity” of, say, the Palestinian legal system, or to encourage equality or empowerment for women. And if, as in any aid economy, the demonstrated success of any program was open to debate, the effort put money in the pockets of the educated, Western-oriented locals who worked there. Those are the people being laid off now.

Next to go will be government employees, whose salaries form the backbone of the economy. It’s a peculiar situation. Palestinians are so good at business that they dominate economic life in countries where they began as refugees, like Jordan and, no kidding, El Salvador. But the West Bank is not an ideal business setting: Israeli troops control the borders, Israeli civil servants the ports, Israeli settlements block access to some 40 percent of the land, and on several occasions, Israeli politicians have held back the tax and custom revenues they are obliged by treaty to collect on behalf of the Palestinians.

As salaries dry up, debts remain. One aspect of the boom was easy credit. A lot of Palestinians bought cars or houses when the money flowed freely, lifted by the general feeling of ascension that some call a bubble. “People used to save up,” says Said Attari, a moneychanger in Ramallah, shaking his head. “The people are coming to the end of the month and have to sell the only piece of land their father left them. Their wives are selling their gold, in order to pay debts.”

Inevitably, people blame the government. You don’t hear it much in Ramallah, perhaps because it’s a stronghold of the ruling Fatah Party, perhaps because of the leather-jacketed intelligence agents hanging around. But people were banging empty pots and pans last week in the streets of Nablus, 30 miles to the north, irked by tax hikes aimed at filling the hole in the budget left by vanishing donor money. And striking students closed down three West Bank universities in outrage over tuition hikes aimed at filling the same budget gap.

“Two thousand shekels ($532) for the month, it’s not enough. You don’t have money to buy nuts,” says Bassam Nimer, who would know, being a nut salesman. His four shops used to employ 40 people; he has let five of them go since the Muslim holidays in early November, when the real downturn started.

The irony — or maybe it’s a paradox – is that the donor money was meant to strengthen the West Bank’s moderate, even mild government, and the institutions of governance whose improvement Abbas’ prime minister, Salam Fayyad, constantly referred to as a “march to statehood.” The march inevitably led to the General Assembly, but actually going there has brought the whole arrangement into doubt.

This one is a paradox for sure: Congress, like the Obama Administration, wants Abbas to concentrate not on statehood but on negotiations with Israel. But peace talks, having dragged on for two decades without evident result, look like an entirely cynical undertaking if the Palestinian side of the table can speak only for the West Bank. Yet when Abbas’ secular Fatah party last year agreed to reconcile with Hamas, which still rules Gaza, Congress warned that it will cut off all funds. That’s $600 million on the table.

The Palestinians on the street, meanwhile, want both “unity” and a regular paycheck. Jawad Tamimi’s brother Khaled steps into the doorway to look at them. “The people,” he says, “are suffocating.”

Karl Vick has been TIME's Jerusalem bureau chief since 2010, covering Israel,the Palestine territories and nearby sovereignties. He worked 16 years at the Washington Post in Nairobi, Istanbul, Baghdad, Los Angeles and Rockville, MD.